Tag Archives: Florida

New Study of Medicaid, Focusing on Kentucky

University of Kentucky Professor of Economics and Mercatus-affiliated scholar John Garen has a new paper on the growth of Medicaid in Kentucky.  It is an enlightening read.  For one thing, I learned that the latest estimates suggest that Medicaid crowds-out private insurance at the rate of 50 to 60 percent (i.e., 5 to 6 out of every 10 new entrants to the program would have obtained private insurance).  The latest estimate, which looks at crowd-out in long-term care insurance, was obtained by Jeffrey Brown and Amy Finkelstein (incidentally, the latter just coauthored a piece that found Medicaid patients tend to be healthier than those without insurance, other things being equal).

I also learned about a number of reforms that have been shown to reduce costs and/or improve patient satisfaction. For example, Arkansas, New Jersey, and Florida have all received waivers to institute “Cash and Counseling” programs for disabled Medicaid recipients.  Under this type of program, enrollees are given a budget for various personal and household Medicaid services.  Then:

[W]ith guidance from a counselor, [they] can select the type, amount, and vendor of the services they purchase.  In other words, they receive a voucher.  Studies of this program indicate it has resulted in high recipient satisfaction, less fraud, and has saved on the use of expensive institutional care.

Here is one such study of the program.

Here is John’s website.

Which Governors Are Proposing Spending Increases and Which are Proposing Cuts?

This week, the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO) have released their biannual Fiscal Survey of States. It is full of lots of interesting information, much of which I plan to highlight over the next week or so.

Today, I’ll start with a simple look at the proposed changes in FY2012 spending, alongside enacted changes in FY2011 spending. I’ve organized the data by FY2012 changes, so you can see that Florida’s Gov. Rick Scott is proposing the single-largest percentage increase in General Fund Spending, while Nevada’s Gov. Sandoval is proposing the largest cuts. I should note that, unlike NASBO’s other regular report (the State Expenditure Report) this one only includes General Fund spending, which is less than half of total state spending. Nevertheless, it is the portion of state spending over which state politicians have the most control, so it does provide some important information. I also included indicators for the party-id of the current governor. It is not surprising that there are greater differences between the parties when it comes to proposed 2012 changes than when it comes to enacted 2011 changes; partisan differences in proposed spending tend to be moderated by the legislative process.

In FY2012, the average Democratic governor proposed a spending increase of 5.8 percent, while the average Republican governor proposed a spending increase of 3.4 percent. I ran a regression and these differences were not statistically significant, even after controlling for regional effects. It was a very simple analysis, with limited data, few control variables, and no attempt to overcome concerns about reverse causality (maybe states whose institutions encourage spending growth are more-likely to elect Republicans in hopes of reining in spending?). Nevertheless, this does comport with more-sophisticated analyses. For example, a study by Besley and Case (2003) finds “little evidence of Democratic governors spending more overall” (though they do increase workers’ comp spending).

The literature does, however, find that the political id of the governor–in conjunction with the political makeup of the legislature–does make a difference: Rogers and Rogers (2000) find that when Democrats control both the house and the governor’s mansion, government tends to be larger than when Republicans control both.

It also turns out that divided government, in and of itself, can make a difference. Besley and Case (2003), for example, found that “greater party competition in the legislature is associated with significantly lower taxes, and significantly lower spending on workers’ compensation.”

More analysis of the NASBO/NGA data to come…

Rating State Business Tax Climates

Today the Tax Foundation released its annual State Business Tax Climate Index.

Good tax policy is not just about low rates. The Index’s author, Kail Padgitt, writes:

State lawmakers are always mindful of their states’ business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. This can be a dangerous proposition.

The public choice pressures that Dr. Padgitt is talking about encourage state policy makers to cut special tax deals for politically-important businesses and to keep rates high for those who are aren’t so well-connected. The Business Tax Climate report is a nice antidote to such thinking:

The goal of the index is to focus lawmakers’ attention on the importance of good tax fundamentals: enacting low tax rates and granting as few deductions, exemptions and credits as possible. This “broad base, low rate” approach is the antithesis of most efforts by state economic development departments who specialize in designing “packages” of short-term tax abatements, exemptions, and other give-aways for prospective employers who have announced that they would consider relocating. Those packages routinely include such large state and local exemptions that resident businesses must pay higher taxes to make up for the lost revenue.

The best climates: South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware, Utah and Indiana.

And the worst: New York, California, New Jersey, Connecticut, Ohio, Iowa, Maryland, Minnesota, Rhode Island and North Carolina.